OMCs in focus; HPCL hits 52-week low, IOC slips 4% on disappointing Q4

As per media reports, the government is considering selling a 20-25 per cent stake in BPCL instead of its entire 53 per cent holding, previously under divestment process.

Shares of oil marketing companies (OMCs) were reeling under selling pressure on the BSE in Wednesday’s intra-day trade after Indian Oil Corporation (IOC) reported a disappointing set of numbers for the March quarter (Q4FY22).

Hindustan Petroleum Corporation (HPCL), Indian Oil Corporation (IOC) and Bharat Petroleum Corporation (BPCL) were down between 2 per cent-7 per cent. 

HPCL hit a 52-week low of Rs 238.80, slipping 7 per cent on the BSE on the back of heavy volumes. At 10:22 am; it was trading 2 per cent lower at Rs 250.40, as compared to a 0.43 per cent gain in the S&P BSE Sensex. A combined 2.6 million equity shares had changed hands on the counter on the NSE and BSE.

BPCL dipped 2 per cent to Rs 336.65 in intra-day trade, quoting close to its 52-week low of Rs 331 touched on February 24, 2022.

As per media reports, the government is considering selling a 20-25 per cent stake in BPCL. Previously under divestment process, the government was going to divest entirety of its 53 per cent stake in the company.

Earlier divestment process has seen three bidders putting expression of interest (EoIs) for BPCL's stake. "Stake sale to a major global player will unlock value for shareholders. However, we await further clarity on timeline, valuation and other details of the stake sale", said ICICI Securities in a note.

Shares of IOC were down 4 per cent to Rs 119.55 after the company reported a weak set of numbers with Q4FY22 standalone net profit declining 31.4 per cent year-on-year (YoY) to Rs 6,022 crore on a margin squeeze in petrochemicals and losses on auto fuel sales.

With oil prices surging, its revenue from operations rose 26 per cent YoY to Rs 2.06 trillion from Rs 1.63 trillion in the same quarter last fiscal.

The company's board has recommended a bonus shares issue in the ratio of 1:2 -- one new bonus equity share of Rs 10 each for every two existing equity shares. It has also declared a final dividend of Rs 3.60 per equity share (pre-bonus), which translates into a final dividend of Rs 2.40 per equity post-bonus for the financial year 2021-22.

"IOC’s reported Q4FY22 numbers were below our estimates, with gross refining margin (GRM) at USD18.5/bbl and marketing margin at Rs 2.3/liter. Refinery throughput was in line, while marketing sales volumes were above our estimate, " said Motilal Oswal Financial Services in a result update.

The brokerage expects a dividend payout to be around 51 per cent in FY23-24 as well.

IOC trades at 7.5x consolidated FY24E EPS and 0.8x FY24E P/BV. It is likely to benefit the most among its peers from an uptick in refining margin, further supported by a robust petchem margin in the near term, the brokerage added.